Tel: 01992 422 128
23 London Road, Hertford, Herts SG13 7LG
Wills, Trusts & Estate Planning
Here at Garden House we pride ourselves on offering a specialist service to ensure that making your will is as simple and painless as possible. We appreciate that many people do not want to consider what will happen when they die, but we are very experienced in making you feel relaxed and at ease. Many clients have told us how relieved they feel once their will has been signed.
We offer a competitively priced, fixed-fee service for the drafting of both simple and complex wills. Also, both solicitors in our private client team are members of Solicitors for the Elderly and specialise in assisting vulnerable clients.
"The will-making advice and service delivered was very clearly and professionally provided in an interested and courteous manner. Both Chris Lucas and Sharon Brown, and the receptionist, were most helpful and courteous." Mr and Mrs G, Harlow
Making a will
Ensuring that your family members are taken care of after your death by having a valid will may be one of the most significant things you ever do. Although different people will have different reasons for making a will, the end result is the same; your loved ones are looked after and things are made as simple as possible for them after you pass away.
One in three people in the UK do not have a will and half of all people over the age of 45 have not made a will. Many people put off making a Will as they believe they have nothing to leave but we all accumulate possessions during our lifetime (even if they are only of sentimental value).
Not having a will adds a burden on your loved ones at a very distressing time for them, particularly if you have not made your funeral wishes known. It can also cause unnecessary delay and expense in administering your wishes after your death.
How much does it cost to make a will?
We offer the following fixed fees for preparing standard wills:
£175.00 plus VAT for a single will
£275.00 plus VAT for mirror wills
Reviewing your will
If you have already made a will we recommend that you review it regularly to ensure it meets your current circumstances. If you have a homemade will or have any doubts over whether your existing will meets your current wishes we are happy to review the will for you free of charge. It is important to remember that having a badly drafted will or one that has been completed without the relevant formalities being adhered to could leave you in the same situation as if you had not made a will at all.
There are certain events and circumstances that can affect the terms of your will. For example, if after signing your will you get married, that will is revoked (unless the Will was made in contemplation of that marriage). Other circumstances include:
• birth of new children or grandchildren;
• start of a new relationship;
• divorce or separation;
• purchase of a new property (either in this country or abroad); and
• any money you win or inherit.
If any of your circumstances have changed please contact our team on 01992 422128 and we will be happy to arrange a free will review.
Storage of your will
We offer to store your original will free of charge for your lifetime, and provide you with a certified copy for your records. This avoids the possibility of the original document getting lost or destroyed.
We also recommend that all wills are with registered with Certainty , the National Will Register. When we write a will for you, registration is included as part of our service and does not cost you any extra.
Jointly owned property
If you own a property with another person you may wish to consider the way in which you own that property. When you first purchase a property with someone, you are asked if you wish to own it as 'joint tenants' or 'tenants in common'.
Joint tenants means that you both own the whole house and that if one of you was to pass away the property automatically passes to the surviving owner regardless of what the person's will may say. If you own the property as tenants in common it means that you each own a share or percentage of the property and can say in your will what should happen to your share when you pass away.
If you contribute different amounts of money towards the purchase then it is a good idea to choose 'tenants in common' and to also prepare a declaration of trust. This is a document that sets out the details of your ownership, and the agreements between you about how the proceeds should be divided if the property is eventually sold. It can also set out who is responsible for outgoings (such as utility bills, mortgage payments and repairs and maintenance) and set out a procedure to be followed if one person wishes to sell.
If you have a declaration of trust that needs reviewing or amending, or if you think that it may be appropriate for your circumstances please call our Private Client team on 01992 422128.
Inheritance Tax is usually paid on an estate when somebody dies, however not every estate will be liable for tax. Every individual has an allowance which they can leave free of tax upon their death. This is known as the ‘Nil Rate Band’ which is currently £325,000.00. If the total value of your assets is worth less than this amount at the date of your death, your estate will not have to pay tax. If your assets are worth more than this amount at the date of your death, your estate may have to pay Inheritance Tax on the surplus at the rate of 40%.
There are exemptions and reliefs available (see below). For example, everything that an individual leaves to their spouse or civil partner passes automatically free of tax, following which the surviving spouse or civil partner can take advantage of the unused Nil Rate Band of their deceased spouse or civil partner. In simple terms, this generally means that if you are a married couple or in a civil partnership with a combined estate worth less than £650,000.00 and you leave everything to each other on the first death, no Inheritance Tax will be payable under the current regime.
HM Revenue & Customs are only concerned with your assets over the Nil Rate Band, therefore great care should be taken not only with regard to how your Will is drafted but also how you may hold any joint assets and whether you have any pensions or life policies which can be nominated or put into trust.
The ‘7 year rule’
You should also be aware of the anti-avoidance rules. In summary, any attempt you make to reduce your estate by giving away your assets before your death will generally be subject to a ‘7 year rule’. The rule is that you must survive for a period of 7 years from the date of the gift you make otherwise the value of that gift will be included in your estate for Inheritance Tax purposes on your death. This is subject to certain exemptions and reliefs, which are discussed below.
Please also note that if you give away an asset when it is your intention to keep some kind of interest in that asset, e.g. putting your property in the names of your children but continuing to live in it or investing a large sum of money in your child’s name but maintaining access to the money and/or reserving a right to the income, the value of the asset in question as at the date of your death will be included in your estate for Inheritance Tax purposes, even if the legal title is not in your name. This is called a gift with reservation of benefit. When you cease to have an interest in that asset e.g. in the house example by moving out of the property or starting to pay your children market rent, the 7 years will start from that date.
Exemptions and reliefs
As stated above, there are a number of exemptions and reliefs that are available to reduce or dispense with any Inheritance Tax payable. The main ones can be briefly explained as follows:
The impact of Inheritance Tax on your estate and the planning options available to you will very much depend on your individual circumstances. We would therefore suggest that if you have any concerns about Inheritance Tax that you discuss it with us if you have not done so already.
Property protection trusts
Do you own a property with somebody else? If so it is important to know that there are two ways of owning property jointly: as joint tenants or as tenants in common.
‘Joint tenants’ means that the co-owners own the whole property together. If one co-owner dies, the whole property passes to the surviving co-owner(s) by survivorship. This tends to be the most common form of co-ownership.
‘Tenants in common’ means that each co-owner owns a share of the property. This might be in equal or unequal shares. When a co-owner dies, their share will form part of their estate and therefore pass under the terms of their will (or under the rules of intestacy if the individual has not made a will).
If you own your property with somebody else as joint tenants, you can change the ownership to tenants in common. This is known as severing the joint tenancy on your property and can be achieved simply by signing a notice, known as a notice of severance, and serving it on the other co-owner.
If you sever your joint tenancy, you will own your property as tenants in common, which will then allow you to dispose of your share of the property under the terms of your will. You may then wish to include a Property Protection Trust in your will, which can have the effect of safeguarding your share of the property for your loved ones in the future.
For example, a Property Protection Trust would typically grant your spouse or civil partner a right to live in the property for as long as they wished, but when they ceased to live in the property permanently, the trust would come to an end and your share of the property would then pass to ‘remainder’ beneficiaries of your choosing, typically your children.
This would mean that if your spouse or civil partner went into permanent residential care after your death, their estate would only include half of the property for means-tested purposes. Your half would be ‘protected’ from any claims from the local authority and would pass to your children at that point. The situation would be very different if the property had been owned as joint tenants and passed outright to your spouse or civil partner on your death.
Another benefit of the Protective Property Trust might be to ensure that, if your spouse or civil partner met somebody else after your death, your share of the property would still be preserved as an inheritance for your children.
A Property Protection Trust can be drafted with as much or as little flexibility as you wish. For example, you can include the right for your spouse or civil partner to direct your trustees to sell the property and buy a new one with the proceeds for them to live in. You can even include the right for your spouse or civil partner to keep all surplus funds from the sale and purchase.
If you are not married or in a civil partnership, you can still benefit from a Property Protection Trust, however there would be tax implications to consider.
Of course, whether a Property Protection Trust is right for you will depend on your individual circumstances and your wishes.
There are two ways to set up a discretionary trust: i) in your lifetime and ii) in your will.
A trust generally is any arrangement whereby selected assets are transferred to trustees of your choosing who have a responsibility to look after and manage the assets for the benefit of the named beneficiaries. A discretionary trust is a type of trust where the trustees are given discretion over the trust fund.
Typically, whilst you would choose the class of beneficiaries eligible to benefit from the fund, your trustees would have complete discretion over which beneficiaries get paid what and when, and they would have the power to decide how to use and invest the trust assets in the interests of the beneficiaries.
If you decide to set up a discretionary trust, we would recommend that you prepare a 'letter of wishes' addressed to the trustees setting out how you would like them to exercise their discretion (we would prepare this on your behalf). Although not legally binding, your trustees would be able to take this into account when exercising their discretion.
Reasons for setting up a discretionary trust might include:
Please note that discretionary trusts are required to pay tax on income and capital gains like individuals. There may also be small inheritance tax charges throughout the lifetime of the trust, namely anniversary charges which arise once every 10 years and exit charges payable on distributions made to beneficiaries.
Please note that if you decided to set up a discretionary trust in your lifetime, there may be an immediate inheritance tax charge depending on the amount placed into trust.
If you have any further questions in relation to discretionary trusts, please contact the Private Client team on 01992 422 128 and we will be happy to assist with any queries you may have.
If you are intending to leave money or assets to a beneficiary who is disabled or otherwise incapable of managing their financial affairs, it would be strongly recommended that you provide for them by way of a trust in your will. This is because any property left outright to a vulnerable beneficiary may impact upon their eligibility for means tested state support and may also cause distress for them if they are unable to deal with their inheritance themselves.
If you have any concerns about providing for somebody who is disabled or otherwise vulnerable, please contact the Private Client team on 01992 422 128 for further assistance.
What is a personal injury trust?
A personal injury trust is a legal arrangement whereby the compensation awarded from your personal injury claim is held by people you choose whose responsibility is to look after the money and use it for your benefit.
The person who sets up the trust is called the ‘settlor’. The people responsible for holding and managing the trust fund are called ‘trustees’. A person who benefits from the trust is called a ‘beneficiary’. You should have at least two trustees; typically these will be yourself and a close family member. For the purposes of your personal injury trust, you will therefore be the settlor, a trustee and the sole beneficiary.
Why set up a personal injury trust?
A common reason for setting up a personal injury trust is to protect entitlement to means-tested benefits. As a general rule, your entitlement to means-tested benefits will be affected if you have over £6,000 and you will usually lose entitlement altogether if you have over £16,000.
When your eligibility for means-tested benefits is assessed, any damages held in a personal injury trust will be completely disregarded when calculating how much capital you own. Therefore, if you claim means-tested benefits or there is a possibility that you will in the future, a personal injury trust may be appropriate depending on the size of your award, as the trust will allow you to claim benefits whilst maintaining your access to your compensation.
Other reasons for setting up a personal injury trust might be to preserve long term care funding or to protect your award from being subject to any future divorce or bankruptcy proceedings.
Is there a time limit to set up a personal injury trust?
Generally speaking, you have 52 weeks from the date that you first receive a damages payment to set up a personal injury trust. Beyond this point, if you receive means-tested benefits, your compensation will count as capital when your entitlement is assessed.
How is the personal injury trust set up?
We will prepare the trust deed for you. Once the deed has been validly signed and witnessed, we will store it and provide you with a certified copy. You and the other trustee(s) will then need go to a bank or building society to open an account for the trust.
Once the trust account has been set up, your compensation award can be transferred into the account. It is at the point when the money is transferred into the trust account that the trust will legally come into existence.
What happens next?
The money is yours. If you do not spend it, it will remain in the trust account and earn interest. The signatures of all trustees will be required for cash withdrawal forms and cheques, but the money will still belong to you and you can require your trustees to use it for your benefit at any time. If you are unhappy with your trustees for any reason, you will also have the power to remove them and appoint new trustees.
If your award is significant in amount, you may wish to speak with a financial adviser about potential options and how best to manage your money. We can recommend a financial adviser for you if you wish.
Please note that you will have a duty to inform the Department of Work and Pensions (DWP) about your change of circumstances. In particular, you will need to tell the DWP about your award and the fact that it is being held in a personal injury trust. If you prefer, you can provide us with your National Insurance number and we will be happy to inform the DWP for you.
Will the trustees have to complete an income tax return?
Because you are immediately entitled to the trust fund, the trustees will not have to complete a tax return in relation to the trust. Any income earned by the trust however will need to be included on your personal tax return if you need to complete one.
Is there anything that the injured person should not do?
You must not place any money in the trust account that is not your compensation. This is extremely important. If you mix your own (or any other) money with the trust money, it might be difficult to identify the trust fund and this would lead to problems with the trust.
You should also ensure that you avoid paying yourself ‘regular’ payments from the trust fund. An example would be paying yourself a fixed amount on the same day of each month or continually transferring the interest payments from the trust account to your personal current account. Anything like this might be deemed as regular income and this could affect your entitlement to benefits. If you need to pay yourself money from the trust fund, you can of course do so; just make sure that the payments are not made regularly and that they differ in amount.
It is also important that you are careful not to pay too much money into your current account at any given time. Remember that if you have more than £6,000, your entitlement to means-tested benefits will normally be affected. In circumstances where trust money is required to be paid to a third party, the money should usually be paid directly from the trust account to avoid it going through your own account.
If you have any queries about personal injury trusts, please do not hesitate to contact us on 01992 422 128.
What is a Bypass Trust?
A bypass trust could save you and your family inheritance tax if you have any of the following:
• a pension scheme which pays out a lump sum on your death;
• death-in-service benefits as part of your employment benefits package; or
• life insurance.
If the value of your estate is over the inheritance tax threshold (currently £325,000), when you die tax will generally be payable on your estate at the rate of 40% of the surplus.
If you died today with an estate worth £1million, that would mean £270,000 in inheritance tax (40% of £675,000).
There are certain exemptions and reliefs available, for example anything left to a spouse or civil partner will be exempt from tax (the spouse exemption).
It is important to be aware of the impact that any death-in-service benefits or lump sums payable to your estate from a pension scheme or life policy may have on your estate for inheritance tax purposes. This is because any sums that become payable to your estate upon your death will generally be taken into account when calculating the inheritance tax liability.
If you had assets worth £300,000 and a life policy that paid £200,000 to your estate on your death, your taxable estate would be £500,000.
It is common for life polices to be written in trust for another person, such as your spouse or civil partner, or you may have told your pension scheme provider that you wish for any lump sum to be payable to another person (often called a ‘nomination’). In the latter case, your pension provider would usually have the power to exercise discretion over the lump sum, although in most cases they would follow your wishes and pay the sum in question to the person that you have nominated.
In the above circumstances, the lump sum payable on your death would be paid directly to the relevant person and therefore bypass your estate for inheritance tax purposes. This may sound like a good thing as the sum would not be included in your estate and would therefore pass tax free to the person that you have chosen.
However, there could still be an inheritance tax problem, namely that the lump sum paid to your spouse or civil partner (or any other person) under the life policy or pension scheme would then become part of their personal estate and this could inevitability lead to a larger inheritance tax bill on their subsequent death.
You have assets in your sole name worth £600,000 and a pension which provides for a lump sum of £300,000 payable on your death. You have nominated your spouse to receive the pension death benefit. You also have a will which leaves everything to your spouse.
When you die, there will be no tax payable on your estate because of the spouse exemption. Your spouse would inherit your assets of £600,000 and receive the £300,000 lump sum free of tax. If your spouse were to pass away shortly after you, however, their taxable estate would be £900,000 (not taking into account any other factors such as assets in your spouse’s sole name).
Your spouse’s estate would be eligible to transfer the unused tax threshold from your estate, meaning that their estate would benefit from twice the normal tax free threshold i.e. £650,000. That would mean tax on the surplus of £250,000 (£900,000 less £650,000), which would mean an inheritance tax liability of £100,000 (40% of £250,000) on your spouse’s death. This could have been avoided altogether through the use of a bypass trust… of their estate and potentially saving a lot of money in inheritance tax.
You have assets in your sole name worth £600,000 and a pension which provides for a lump sum of £300,000 on your death (as in the example above). You have set up a bypass trust in your lifetime to receive the pension death benefit. In the trust, you have named the class of beneficiaries as your spouse, children and grandchildren. You have also prepared a separate letter of wishes addressed to your trustees stating that your wish is for your spouse to be looked after and treated as the main beneficiary. In your will, you leave everything to your spouse.
When you die, there would be no tax payable on your estate because of the spouse exemption. Your spouse would inherit your assets of £600,000 and the lump sum of £300,000 would be paid to your trustees to hold on the terms of the bypass trust.
Your trustees would have discretion over the £300,000 under the terms of the trust. Your trustees may decide to follow your wishes and subject to the terms of the trust, they would have the power to make an interest-free loan of £300,000 to your spouse, which would allow your spouse to benefit from the fund during their lifetime.
On your spouse’s subsequent death, their estate would owe the sum of £300,000 to the trust and this would be considered a debt of their estate. If your spouse died with a gross estate of £900,000, this would mean £300,000 would need to be paid back to the trust for the benefit of your children and grandchildren. Your spouse’s net estate would therefore be £600,000 (not taking into account any other debts owed by the estate).
Your spouse’s estate would be eligible to transfer the unused tax threshold from your estate. As their estate would be underneath the threshold of £650,000, there would be no inheritance tax to pay.
The above represents a simple example of how a bypass trust can be used to save potentially thousands of pounds in inheritance tax.
Another advantage of a bypass trust is that it allows you to keep a degree of control over the money you are directing into trust, as you are able to specify the class of beneficiaries eligible to benefit from the trust fund.
Depending on the amount of any lump sum being paid into the trust, there may be tax payable throughout the lifetime of the trust in the form of ‘anniversary charges’ payable every 10 years and ‘exit charges’ payable on distributions from the trust fund. However, any tax payable is likely to be relatively small in amount, especially when compared with the potential savings in inheritance tax.
If you are interested in setting up a bypass trust and/or would like further information, please telephone the Private Client team on 01992 422128.
Wills, Trusts and Estate Planning
- Making a Will
- Jointly owned property
- Inheritance tax
- Property protection trusts
- Discretionary trusts
- Vulnerable beneficiaries
- Personal injury trusts
- Bypass trusts
Probate & Estate Administration
Powers of Attorney & Court of Protection
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Garden House Solicitors is the trading name of Garden House Solicitors Limited a Company registered in England No. 7546805 - VAT No. 880 3524 25
Registered Office 23 London Road, Hertford, Herts SG13 7LG
Authorised and regulated by the Solicitors Regulation Authority www.sra.org.uk (SRA Number 558153) Director: Patricia E Ling LL.B. (Hons)
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